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Johnson & Johnson is closing its insulin pump business and the market may soon be down to two players.
In early October, J&J announced it would shutter Animas Corp., its insulin delivery company subsidiary, and transition its approximately 90,000 existing customers to Medtronic plc, the primary player in the pump market.
“With changing needs of customers, rapidly evolving market dynamics, and increased competitive pressures, it proved too difficult to sustain the insulin pump business and we decided to pursue an exit of the business,” Valerie Asbury, general manager of Animas, said in a statement.
The consolidation will affect patient choice in the diabetes pump market and could mean tighter pump supplies because one of the remaining major pump manufacturing facilities is in Puerto Rico, which has been devastated by recent hurricanes.
Before the Animas shutdown, J&J had 12 to 14 percent of the pump market, and Medtronic had about 70 percent, David Kliff, publisher of the Chicago-based Diabetic Investor, told Bloomberg Law Oct. 20. Post-shutdown, Medtronic will have closer to 85 percent of the market, he said.
The total U.S. insulin pump market, including the pumps and their associated supplies, is worth about $3.5 billion annually, Kliff said.
Animas’s closure leaves three insulin pump manufacturers still in the game: one is the market giant, Dublin, Ireland-based Medtronic; the other two are Billerica, Mass.-based Insulet Corp. and San Diego-based Tandem Diabetes Inc.
Kliff expects further consolidation.
“Tandem’s effectively going out of business,” he said. “They’re running out of money. Effectively, the market is down to two players, one being Insulet,” he said,
Tandem’s chief administrative officer acknowledged Oct. 21 the company needs a further infusion of cash, but refuted the prediction that Tandem would exit the market.
“Medtronic will control approximately 85 percent of the market and then you’ll have Insulet, so that’s kind of the market,” Kliff told Bloomberg Law in an Oct. 20 phone call.
The increasing consolidation “is bad for patients in the long run,” he said. Traditionally, when a market comprises multiple players, insurers can pit players against each other to get price concessions, Kliff said.
With fewer competitors in the pump market, “the only way they can fight back is to make the requirements more onerous,” he said.
Insurers can still play hardball with the remaining players, Kliff said, citing as an example Anthem’s refusal earlier this year to cover Medtronic’s MiniMed 670G closed hybrid loop insulin pump and sensor system on the grounds it’s an investigational device and “not medically necessary.”
“It’s not like payers don’t have weapons to fight back with,” he said.
A bigger worry with consolidation, though, is the availability of supply. Medtronic has two facilities that manufacture the pumps, one in California and one in Puerto Rico. The Puerto Rico facility has been severely affected by recent hurricanes. “That is impacting the ability to supply patients right now,” Kliff said. “It’s a problem and will be a problem,” he said.
“The impact becomes more of one of patient choice,” he said, “and whatever options are available.”
As part of J&J’s transitioning of existing patients to Medtronic, patients using an Animas insulin pump will be offered the option to transfer to a Medtronic pump, Asbury said.
“It depends where you are in the warranty cycle; you’ll either get a new pump or you can keep your old pump,” Kliff said.
Meanwhile, Insulet is also making a play to grab Animas customers, too, announcing several recent initiatives to attract Animas pump users.
J&J, which acquired Animas in 2005, put the unit up for sale but didn’t find a buyer, Kliff said.
“I believe they incorrectly valued it,” he said. “Financially, they felt they were better off to shut it down and take the loss rather than to sell it,” he said.
“Tandem has been very clear on regular earnings calls that it will need continued investment to further grow and sustain the business. ... Our recent stock offering was in support of this overall financing strategy,” Chief Administrative Officer Susan Morrison told Bloomberg Law in an Oct. 21 email.
“We remain confident that our differentiated insulin pumps, the power of our Tandem Device Updater, and our robust pipeline position us well to compete both in the near and long term,” Morrison said. “We remain busy working hard to support our customers for years to come,” she added.
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